Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Teamsters, Boeing have a new contract April 29, 2025
- Boeing wants to remarket China’s airplanes. It’s costly and time consuming. April 28, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 19. April 25, 2025
- How good is the C929? Part 2. April 24, 2025
- Boeing First Quarter Results Update: China is 10% of the backlog, with 500 in “Unidentified” April 24, 2025
Safran overcomes supply chain woes as revenues soar
By Tom Batchelor
February 15, 2024, © Leeham News: French engine, equipment and interiors specialist Safran said revenues soared by more than a fifth in 2023 despite a “challenging supply chain environment” and inflationary pressures.
Announcing the company’s full-year 2023 results, CEO Olivier Andriès hailed the progress made last year as “outstanding”. Revenues were up 22% in 2023, to €23.2bn, vs. €19bn in 2022.
Safran said this was in part due to its positioning on narrow-body markets, which are now above pre-COVID, 2019 levels and growing. With large order backlogs for single-aisle airplanes, the supply chain has struggled to keep up with demand.
The Paris-listed company’s operating income was up 31%, from €2.4bn in 2022 to €3.1bn in 2023, and free cash flow generation topped €2.9bn, which was above expectations and an increase on the €2.6bn in 2022. Read more
Airbus hails ‘landmark year’ with strong 2023 results amid delivery ramp-up
By Tom Batchelor
February 15, 2024, © Leeham News: Airbus gave more details of its planned ramp-up today as it announced 2023 full-year results, with revenues climbing 11% year-on-year to €65bn and adjusted earnings before interest and taxes (EBIT) up 4% to €5.8bn.
The European manufacturer is targeting 800 commercial aircraft deliveries in 2024, above the 735 delivered last year, an increase of almost 9%. Airbus is seeking a ramp-up in production to meet increased output targets across its commercial division, including 75/mo for the global A320 family program.
Airbus FY 2023 commercial positioning. Click to enlarge. Source: Airbus.
Guillaume Faury, Airbus chief executive officer, told investors that the company was seeking to strike a balance between “very strong demand” for its aircraft and “the ability of the supply chain to meet the demand.”
Faury said 2023 had been a “landmark year” with a “record-breaking level of aircraft orders and backlog”. He added: “We continue to see momentum for civil and defense markets.”
However, the Airbus Defense and Space division continues to struggle with adjusted EBIT down 40% year-on-year, to €229m from €384m.
Across all of its business segments, Airbus said it expects to achieve EBIT Adjusted of between €6.5bn and €7bn in 2024. Read more
Production rates below Boeing’s claim, low supplier confidence
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By Scott Hamilton
Feb. 15, 2024, © Leeham News: The Federal Aviation Administration (FAA) may have told Boeing it won’t allow product rate increases on the 737 MAX lines, or the addition of the North Line at Everett (WA) until it’s satisfied production quality is under control.
But as LNA first wrote upon this news, Boeing’s production is well below the currently approved 38 per month. We pointed out that Boeing was consistently struggling last year to roll 31 MAXes out of the factory—and often, the number was substantially below 31.
Sometimes the number of newly produced 737s was less than 20 a month, reports one consultant who tracks the production.
Technically, the FAA can’t stop Boeing from producing more 737s than the 38 per month cap. It doesn’t have this authority, reports Aviation Week. But the FAA is the responsible party for issuing individual aircraft airworthy certificates as the 737s are ready for delivery to airlines and lessors. And, according to AvWeek, the FAA won’t issue more than 38 certificates a month.
The FAA suspended Boeing’s so-called ticketing authority for the MAX before the airplane was recertified following the 21 month grounding beginning in March 2019. This suspension was extended to the 787 when production and quality control problems were discovered at the Charleston (SC) assembly plant.
Several aerospace analysts following Boeing pointed out that Boeing hasn’t produced 38 MAXes a month and, like LNA reported, it’s struggled to meet even the previously advertised rate of 31/mo.
Figure 1. Cirium plotted the actual new production deliveries vs the advertised production rates for Airbus and Boeing single-aisle aircraft.
The consultancy Cirium charted the actual deliveries by Boeing (and by Airbus) for their respective single-aisle aircraft.
What is an ODA and why is it critical to understand it
By the Leeham News Team
Feb. 14, 2024, © Leeham News: In Congressional hearings last week, the administrator of the Federal Aviation Administration (FAA) said the agency will retain an outside organization to review whether its oversight of Boeing needs to alter how this is done.
Administrator Mike Whittaker, who has only been on the job a few months, said the FAA may want to change its Organization Designation Authorization (ODA) process that oversees Boeing.
ODA Unit Members (Designees) are Boeing employees who report to the FAA. But for years, highlighted by the first 737 MAX crisis in 2018-19, complaints suggested Boeing exerted undue influence on its Designees to get what it wanted in the development, production, and oversight of its 7-Series airplanes.
Because of that crisis combined with multiple issues with the 787 production facility in Charleston (SC), Boeing’s ODA was suspended.
The FAA also has a problem: Boeing’s ODA was suspended. Congress has a problem: The FAA and Boeing appear to operate too closely together and have lost public trust.
What is an ODA and why does the FAA need to delegate work back to the companies being monitored using Designees? LNA takes a deep dive analysis into the ODA problems at Boeing and what can be done to restore confidence in Boeing, the FAA, Congress, and the flying public. This is the first of two articles.
Risk-Adjusted Business Outlook
- A 2024 view of macroeconomic and indicators for the aircraft finance and leasing markets
By David Yu and William Loh
Feb. 13, 2024, © Leeham News: As we entered 2024, this is an interesting time for aircraft finance and leasing. As an industry and economy, we have come from historically low-interest rates (cost of funds) close to 0% to a federal funds rate of 5.5%.
The US Federal Reserve has indicated cutting rates going forward. The US economy is still ripping it on many measures and the threat of a hard landing has all but vanished, with inflation coming under control. That said, Wall Street consensus is a low 4% federal funds rate which would mean a lot more rate cutting. But this is not what the frothy economic indicator data suggests. Instead of immediate large cuts, we only see small and short cuts towards the end of the year.
This is not what some folks were hoping for when they entered into previous deals. They want to have the lowest rate possible, especially for those with debt coming to maturity and needing to be refinanced in 2024 (a significant number). Wherever interest rates end up, it will not be what investors have planned for, and too high a rate environment will all but ensure an increased pressure to sell.
Airbus should tread carefully
- Airbus announces is 2023 earnings on Feb. 15.
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By the Leeham News Team
Analysis
Feb. 12, 2024, © Leeham News: United Airlines has reportedly been looking to Airbus to replace the Boeing 737 Max 10s that Boeing is having difficulty delivering, due to the Alaska Airlines accident and the resulting delays in certification to the Max 7, Max 10 & 777X programs. Airbus has been searching for ways to recover/create slots to take on a premium customer and poach them from Boeing.
A320 production rates are headed towards 75 a month in the 2025/2026 time frame, with Airbus confident that its supply chain can meet the demand and will commit to the rate for the long term. These are record production numbers with the previous high-water mark reached in 2019 with 863 total deliveries: 642 of those from the A320neo family, or 54 a month. The A220 program is also headed for an increased production rate of 14 a month at about the same time.
However, Airbus has its own kinks to work out, along with concerns outside its control:
- Geared Turbofan (GTF) on wing engine issues from supplier Pratt Whitney.
- The A220 & A330Neo lines aren’t selling as well as they’d like to
- 2024 US presidential election could really upend the apple cart.
- Another Max accident would be a bad thing, even for Airbus (more below).
There has been speculation and calls for Airbus to push the envelope even more, reaching 90 a month to offset the Boeing shortcomings.
75 & 14 a month are already huge goals and pushing suppliers to go past those targets might compromise quality. People will cut corners when they are greedy. Besides, a little scarcity when you are the top dog isn’t the worst thing; Boeing isn’t coming to the party with anything new in the near future.
2023 Boeing Financial Results: $41m earned at BCA–(or was it?)
- Airbus 2023 earnings are announced on Feb. 15.
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By the Leeham News Team
Feb. 9, 2023, © Leeham News: On January 31, Boeing released its year end results for the fiscal year and despite the entire company ending up in the red, analysts and investors alike pointed to the bright spot at Boeing Commercial Airplanes (BCA). Positive margins and earnings of $41 million. Some good news finally, after five years of less than stellar results.
Boeing has been beset by problems since its last profitable year in 2018:
- Two 737 MAX crashes and subsequent grounding, leading to a buildup in inventory.
- 787 delivery stoppage and a further build-up in inventory, with a $3.5bn write-off.
- 777X certification delay and a $6.5bn write-off.
- Numerous and costly production missteps.
The slide continued into 2024 when a 737 Max 9 door plug blew out during an Alaska Airlines flight, leading to increased scrutiny by regulators and further delays to the Max 7 and Max 10 certification process.
With the earnings release, there was some good news amongst the rubble; BCA was finally beginning to turn things around in the right direction, posting positive margins and a gain of $41 million. Not earth-shaking, but a small measurable baby step towards profitability.
Boeing to Suppliers: FAA audit of 737 could change production schedule, but stick to plan for now
[Ed. note: The headline and top of this story have been reworded for clarity.]
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By Dan Catchpole
Boeing’s Ihssane Mounir talks to suppliers at the 2024 Pacific Northwest Aerospace Alliance conference.
Feb. 8, 2024 © Leeham News: The head of the Boeing Commercial Airplanes supply chain told suppliers to keep making parts for the 737 MAX at the existing production schedule while the Federal Aviation Administration scrutinizes Boeing’s production of the single-aisle jetliner. He added that the production pace could be affected by the FAA’s audit results, which are expected in March.
“I would ask all of you to bear with us,” BCA senior vice president of Global Supply Chain and Fabrication Ihssane Mounir said at an aerospace supplier conference on Wednesday. “Let us get through this process with the FAA, the audit process, and see what the findings are and how we mitigate those findings…and what it’s going to take to get back to the production rates as we forecasted them before.”
The current schedule has the 737 production lines going to 42 airplanes per month starting this month. However, in the wake of a door plug panel blowing out of a two-month-old 737 MAX 9 flown by Alaska Airlines, the FAA on Jan. 24, told Boeing it could not increase the production rate past 38 airplanes per month. The planemaker already had been struggling to deliver that many MAXes each month.
Mounir said quality and safety trump every other concern and that Boeing and its suppliers have to get back to basics when it comes to ensuring quality. For the time being, he told suppliers, “If you have an issue, please call, and we’ll work with you.”
Summary
- Mounir: Quality trumps everything else
- Boeing urges suppliers to voice concerns
NTSB confirms door plug bolts were missing on Boeing 737-9 MAX
By the Leeham News Team
Feb. 7, 2024, © Leeham News: The National Transportation Safety Board (NTSB) yesterday issued its preliminary report on the Alaska Airlines Flight 1282 structural failure on Jan. 5 this year. (A link to the report is below.)
The emergency exit door plug separated from the two-month-old Boeing 737-9 MAX due to faulty installation, the National Transportation Safety Board confirmed.
A door plug on an emergency exit on a two-month-old Boeing 737-9 MAX blew off the airplane as it passed more than 16,000 ft shortly after takeoff from Portland (OR). Nobody was killed and only a few injuries occurred. The flight crew made an emergency landing in Portland a few minutes later.
Within days, the focus for the incident landed on Spirit AeroSystems, which makes the fuselages and installed the door plug, and on Boeing, which completed final assembly at its Renton (WA) 737 plant. Quality assurance, or “quality escape” in aviation jargon, was suggested to be issues at Spirit and Boeing.
LNA’s Bjorn Fehrm quickly concluded that four bolts meant to hold the door plug in position after installation were missing. The bolts are designed to prevent the plug from moving upward off flanges that hold the plug in place in the fuselage opening.
The NTSB’s investigation confirmed that these four bolts were missing after Boeing removed and reinstalled the plug to fix a quality escape from Spirit affecting the plug. Boeing employees failed to reinstall the plug.
Removing the plug is not a standard final assembly procedure. It’s called an “unplanned removal.” There is a specified procedure to reinstall an unplanned removal. It appears that Boeing failed to follow its own procedures.
LNA on Jan. 15 detailed the procedures for unplanned removals and reinstallation.
Related articles
- Unplanned removal, installation procedures at Boeing
- 737 incidents prompt new scrutiny at Boeing
- Alaska 1282 isn’t a “MAX” story, it’s a quality assurance issue at Boeing and Spirit
Quality Will Drive Pay for Spirit Executives
By Dan Catchpole
Feb. 6, 2024 © Leeham News: Quality more than quantity will drive Spirit Aerosystems executives’ compensation when the company unveils its new formula when it files its proxy statement in March, the company’s CEO Pat Shanahan told Wall Street analysts on Tuesday. 
“It will be significantly different, and the heaviest weighting will be only quality,” he said during a conference call discussing Spirit’s fourth quarter earnings report.
The panel blowout on Alaska Airlines Flight 1282 last month highlighted ongoing quality problems at Spirit and Boeing. Unlike the violent decompression on the 737 MAX 9, the quality problems typically just create financial headaches and public embarrassment for the two companies.
Spirit recorded $59M in net income, 48 cents adjusted earnings per share, and $42M free cash flow in the fourth quarter of 2023, its first profitable quarter since the beginning of 2022.
The company’s performance was boosted by a contract renegotiation and financing deal signed with Boeing in October. Spirit is getting close to signing a similar deal with Airbus, Shanahan said.
Summary
- Quality metrics for exec compensation
- Short term, long term plans for improving quality
- Negotiations with Airbus